C2-31. Ethical Problem Uncovered by Cost Estimation

Sounders Management Company owns and provides management services for several shopping

centers. After five years with the company, James Heller was recently promoted to the position of

manager of Brunswick, an 18-store mall on the outskirts of a downtown area. When he accepted

the assignment, James was told that he would hold the position for only a couple of years because

Brunswick would likely be torn down to make way for a new sports stadium. James was also told that

if he did well in this assignment, he would be in line for heading one of the company's new 200-store

operations that were currently in the planning stage.

While reviewing Brunswick's financial records for the past few years, James observed that last

year's oil consumption was up by 8 percent, even though the number of heating degree days was down

by 4 percent. Somewhat curious, James uncovered the following information:

Brunswick is heated by forced-air oil heat. The furnace is ve years old and has been well

maintained.

Fuel oil is kept in four 5,000-gallon underground oil tanks. The oil tanks were installed

25 years ago.

Replacing the tanks would cost $80,000. If pollution was found, cleanup costs could go as high

as $2,000,000, depending on how much oil had leaked into the ground and how far it had spread.

Replacing the tanks would add more congestion to Brunswick's parking situation.

Required

What should James do? Explain.

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